GM's May sales rev up on mini-SUV, pickup sales

LauraMandaro

SAN FRANCISCO (MarketWatch) -- General Motors Corp. and Toyota Motor Corp. on Friday reported surprisingly strong growth in May sales, as consumers took their cues from higher gasoline prices to shop for more fuel-efficient vehicles rather than avoid dealerships altogether, as some had feared.

GM
GM, +1.22%
the world's largest automaker, said that sales of its cars and light trucks rose 9.6% from the year-ago May to 371,056 vehicles. Stripping out the boost from one extra selling day this May, GM sales climbed 5.4%. On this basis, growth topped forecasts from several Wall Street brokerages predicting GM would post a 1% gain or a slight loss.

The Detroit-based automaker rallied on the release and shares ended 1.7% higher at $30.50.

Helping the automaker rebound from an April tumble, consumers drove off with smaller SUVs such as its GMC Acadia and Saturn Outlook. These models weren't for sale last May. Plus, large pickup trucks that outrank some rivals in fuel efficiency, such as its Chevrolet Silverado, posted double-digit sales increases.

Rising prices at gas pumps also spurred more sales of Toyota Motor Corp.'s
TM, +0.02%
hybrid vehicles, helping propel the Japanese company's U.S. sales 14% higher to 269,023 vehicles unadjusted for the extra selling day. That better-than-anticipated volume propelled Toyota past Ford Motor Co.
F, +0.71%
into the rank of No. 2 U.S. automaker for the second time this year. Sales of Toyota's hybrid Prius nearly tripled.

"The impact of higher gasoline prices was starkly reflected in the data. Light trucks sales declined by 762,000, while car sales increased by 654,000," said Sophia Koropeckyj, an economist at Moody's Economy.com, summing up the industry's overall U.S. seasonally adjusted, annualized numbers.

DaimlerChrysler
DCX
(710000) said that its U.S. sales rose 4% in May to 221,164 vehicles compared with forecasts of a 2% to 4% rebound on an adjusted basis. A 20% jump in Jeep brand sales, helped by demand for Jeep's compact SUV the Patriot, boosted Chrysler Group results. And Honda Motor Co.
HM
said its U.S. sales in May rose 2.5%, though they slipped when adjusted for the extra day.

The upshot was a slightly better-than-expected performance for the industry in May, a month that saw regular gasoline prices climb to $3.23 a gallon, on average; a drop in consumer confidence; and reports of declining home prices. Sales totaled a seasonally adjusted annual rate of 16.16 million, a slightly faster pace than a year ago, said industry tracker Autodata Corp, and a bit more than the roughly 16 million forecast by analysts.

"I think people delayed purchases in April because they were looking for where gas prices were going to go," said Alex Rosten, an industry analyst with Edmunds.com.

When they saw them continue to rise, buyers flocked to smaller versions of once-beloved SUVs, hybrids and new big trucks that tout better mileage standards.

"It's not so much a scale-back as a product shift," Rosten added.

Still, sales were far from rip-roaring: May sales on an annualized basis hit their lowest level since November, said Autodata.

Blue oval

Heightened demand for car-based SUVs couldn't save the day for Ford's results.

The Dearborn, Mich., company said that its U.S. sales slid nearly 7% in May compared with the year-ago numbers, generally in line with forecasts as it clamped down on low-margin sales to car rental agencies.

But sales to individual consumers also slipped, by 3%, despite solid sales of new car-based SUVs like the Ford Edge.

The drop also confounded Ford's own expectations of a small increase. After consumer sales showed consistent trends for most of May, "the last week of the month was softer for us," said Ford sales analysis manager George Pipas in a conference call Friday.

Passenger-car sales plunged 17.7% to 89,126. Sales of its light trucks rose just under 1% to 170,344, helped by demand for its redesigned Ford Escape and Mercury Mariner sport-utility vehicles.

Also, the No. 2 U.S.-based automaker said that it plans to produce 640,000 vehicles in the third quarter, or 2,000 fewer than in the year-ago quarter.

Ford shares closed up a penny at $8.35.

U.S.-listed shares in DaimlerChrysler, which has agreed to sell an 80% stake in its Chrysler Group to private-equity firm Cerberus Capital Management, closed 0.2% higher at $91.68.

Holiday sales

Leading up to and during the long Memorial Day weekend, automakers rolled out incentives designed to reel in buyers ahead of the summer driving season.

'I think people delayed purchases in April because they were looking for where gas prices were going to go.'
Alex Rosten, Edmunds.com

The average U.S. auto incentive in May was $2,497 a vehicle, up $44, or 1.8%, from April and $123, or 5.2%, from May of last year, according to Edmunds.com Friday.

In total, the industry spent about $3.7 billion in incentives in May, estimates Edmunds.com, or 12% more than the previous month. Japanese manufacturers, which make up about one-fifth of incentive spending, increased their promotions by $156 to $1,374 for every vehicle sold, while domestic manufacturers averaged $3,258 per vehicle sold, down $11 from April.

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